Too many people and businesses are cheating the tax system and getting away with it

The AG says the CRA needs to do a better job

The mishandled procurement of fighter jets wasn’t the only thing on Michael Ferguson’s mind Tuesday. Canada’s Auditor General also revealed a report saying people and businesses that don’t file or register taxes are getting away with it too easily. He concluded that the Canada Revenue Agency needs to do a better job monitoring and enforcing failed tax returns from individuals and corporations, and better ensure that businesses register to pay GST and HST.

“The Agency continues to struggle to develop measures that demonstrate its effectiveness in addressing filing or registration compliance,” Ferguson said, quoted by the National Post.

At issue is the CRA program that’s meant to identify which cases are worth pursuing. Ferguson said the program is too small— with $39 million of the agency’s $4.5 billion budget—to look into the thousands of non-filers and non-registrants identified by its automated system. His report did not identify the lost revenue this represents, but Ferguson emphasized that the system “needs improvement” so that workers can make sure the cases they choose to go after are the biggest ones.

Still, as the CBC reports, the 700 employees tasked with combing for tax cheaters have yielded impressive results. In the two fiscal years that Ferguson looked at, they uncovered $5.6 billion in additional taxes, penalties and interest. That’s $4 million per employee, per year.

Makes you wonder what they’re missing.

 




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Too many people and businesses are cheating the tax system and getting away with it

  1. Twice in the last 8 years, my wife and I have been audited.  Both times it was for unusual medical expenses.  My wife had cancer, and I had a gall bladder removed, and both medical necessities triggered an audit.  In BOTH situations, once all the receipts and costs had been deducted, Revenue Canada had to refund money to us.  We had not deducted enough.

    Surely there are better targets for tax collectors than sick people.

    • Not sure why you’re complaining… you got MORE money out of the deal.

      • I don’t think LGC was complaining as much as pointing out Revenue Canada’s waste of time and money auditing small players. A similar event happened to me over university deductions – same result – a refund. Considering an accountant’s salary this comes out a loss for tax payers. Time to focus on bigger fish.

        • It makes you wonder about who is processing the original filings…they should notice when people deserve a bigger refund and respond accordingly.  The job of the people at the revenue department is not just to make sure people aren’t cheating it is also to make sure people are not paying too much tax.

      • Karla, have you been audited. I am sure you haven’t or you wouldn’t be asking the question. An unnecessary audit it a waste of money and time for both parties.

      • I would complain too Karla because the person who was reviewing LGC’s original filings should have picked up on the errors and gave he and his wife the increased deduction.  Rather, that person was to busy targetting LGC and his wife for an unnecessary audit.

    • Was it an actual audit, or did they just ask to see the receipts in question?  There are a lot of people who claim a lot of things that aren’t actually medical expenses (for example did you know those alert necklaces and things for when you’ve fallen and can’t get up are not a medical expense)

  2. $5.6 billion in additional taxes, penalties and interest. That’s $4 million per employee, per year. What they claim and what is true ? are 2 worlds apart . They know it!

  3. It’s very simple.  Compare the value of a person’s home with their declared income.  If there is a big discrepancy, then audit.  If someone reports gross business income that is 6 figures, but net business income that is less than $10K, then audit.

    • I remember talking to one CRA auditor that had a note pad in his car and would write down licence plates of people driving very expensive vehicles. He said he had caught a lot of people that way.

    • With regard to your theory about a person’s house value vs. their declared income…you might want to check out some important things before deciding to audit……how much of the house does the person actually own and do they have a stick of furniture in it.  I know a fellow who made $40K.  His Italian inlaws gave him the downpayment for a house he could not afford on his salary.  The house was virtually empty and after making the monthly mortgage payments, he could hardly scrap up the money to get his kid’s haircut at a discount salon.  Alot of people are living with alot of debt.

  4. LGC
    Yes! There are better cases but the fundamental point is that they are not getting caught.
    We are Canadian now but our business in the UK was audited and we had it explained to us that we were not claiming enough.
    The Auditor explained that the system works on the computers picking almost all the people who are outside the norms and then a small proportion at random.
    He told me that around 50% of those who underpay/claim are cheating and around 40% of those who appear to pay to much but 80% of their yield came from the random sample.

  5. Unfortunately if it was that simple someone a lot smarter then you would have thought of it.
    One of the essential problems of policing anything is that the criminals (taxdodgers are criminals) earn far more from their crime than the investigators. Therefore by definition are smartest of the world biggest criminal organisation hire the smartest people the biggest criminals are corporate..

  6. Finally, effective employees who more than earn their keep. Maybe I’ll tell my son that auditing would be a fine profession. 

  7. Hm, so you mean that when people compare us to Greece now I’ll have to agree?

  8. We will have to work till 67 because the government is too stupid to fix tax collection problems

    • If the govenment like harpers would just put a tax on big business and we wouldnt have to work till 67. But work till 60 the PC’s always care about big business and make the little guys pay. We will be getting worse as the years go on because people keep voting in a cheat. We have to start to look at the little guys because we carry the country on our backs.

    • We’ll have to work until 67 because the Harperites have an ideology to promote – namely, you’re only worth as much as your bank account, or how much profit someone else can extract from your efforts. Does no one remember Kevin Page’s February report stating that OAS would not only be fine, but could actually be increased a little bit, due to Flaherty’s health funding changes?

  9. My husband was audited because he claimed our daughter university expenses.
    At this time his earning was about $35,000. I do not understand why CRA spend time
    to search for small fish.  

    • To do otherwise would have people accuse them of “profiling” the rich as tax cheaters.

  10. Where are all the Occupy people to tell us and the AG that 1% of the people have all the money, so there’s little point going after the other 99%?

    On a more serious note, there is a considerably diminishing return by targeting lower income taxpayers with audits.  The “thousands of non-filers and non-registrants” are overwhelmingly people who owe no tax and are not required to register.  Spending millions to audit them would produce diddly squat.

    The suggestion that CRA adopt audit practices of comparing reported income to housing value has merit (in fact, CRA already performs thousands of “net worth” audits yearly), although there are plenty of reasons one’s income might not equate to the value of one’s house – just ask anyone who bought Vancouver real estate 20 years ago.

    As someone with considerable professional experience with CRA audit and collections practices, I must admit I cringe every time the AG eggs them on.

    •  I think non-registrant’s in the sense used above is someone who hasn’t registered as per requirements to collect and remit GST.  That can be a problem in and of itself even if no GST turns out to be owing in a given year.

  11. The underground economy is alive and well. We call our politicians corrupt too often without surveying the society that they are plucked from.
    Sadly people miss the irony of tax dodging while b******g about poor Healthcare, infrastructure and other vital government run functions.
    Government officials too often preach the need to lower taxes. Enforce, review and streamline the tax code into something that becomes harder to cheat but balanced to the law abiding populace.

  12. C’mon Macleans.  700*4M does not = 5.6B. 

    Makes me wonder what else you’re missing….

    • Oops -  2 years.  Egg on my face.  Sorry Macleans.

  13. You have to kidding. I run a $2m business and have been audited twice in five years by these bullies. I also get audited by the OSC and am now required to have audited books by KPMG. I am closing my business at the end of the year as I have to so bureaucratic it will be easier to just work in a large business where I can get on doing what I love and not be doing this continuous paperwork.

  14. FLAT TAX

  15. Who’s side are you on, the government’s?

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